Maryland National Bank v. Vessel Madam Chapel, Official No. 924662

Maryland National Bank (MNB) appeals the summary judgment in favor of Matthew 0. Jones, a claimant to the vessel, in MNB’s admiralty action in rem against the MADAM CHAPEL to foreclose a preferred ship mortgage. In a published opinion, the district court held that MNB’s preferred mortgage was equitably subordinated because its assignor failed to comply with standard good lending practices that would have avoided the problem of a state chain of title separate from the vessel’s federal registration. Maryland National Bank v. The Vessel Madam Chapel, 821 F.Supp. 1361 (S.D.Cal.1993). We disagree that an extra layer of requirements having to do with a mortgagee’s lending practices may be superimposed on the Ship Mortgage Act, former 46 U.S.C.App. §§ 911-984 (recodified in 1988 as part of the Commercial Instruments and Maritime Liens Act, 46 U.S.C. §§ 31301-31343 ). 1 Accordingly, we hold that MNB’s preferred ship mortgage was improperly subordinated to Jones’s claim to the vessel, and we reverse.

I

In March of 1987, John A. Chapel purchased a new pleasure vessel, which he named the MADAM CHAPEL, with $210,-000 borrowed from Key Financial Services, Inc. A Loan and Security Agreement…